Indian Arbitration and Conciliation Act, 1996


Posted On : May 31, 2022
Indian Arbitration and Conciliation Act, 1996
Arbitration and Conciliation Act, 1996 was initially enacted to fulfill India’s obligation under the UNCITRAL Model Law on International Commercial Arbitration in 1985. But the same has proven beneficial in effective dispute resolution without court intervention. Know more about the Arbitration & Conciliation Act, 1966.
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Have you heard about the arbitration process for legal disputes? In India, the alternative dispute resolution methods are making headlines in recent times. All credits to the people batting for benefits of such processes for both judiciary and more importantly, the common man in the longer run. The Arbitration and Conciliation Act, 1996 is the legislation which governs two types of ADR in India, i.e. arbitration proceeding and conciliation. Check out more details about the Arbitration & Conciliation Act, 1996 below. 

 

Alternative Dispute Resolution in India

The legal system in India relies upon the maxim ‘Ubi jus ibi remedium’ which means where there is a right, there is a remedy. Whenever a right has been violated, people resort to the temple of justice, i.e. the courts. Although this approach is not at all erroneous, it has resulted in enhanced burden over the judiciary. The workload accumulates and leads to decisions pronounced years after the dispute arose. justice delayed is justice denied and to curb the delay, alternative methods have been resorted to in the past years. Recently, even the President of India and Chief Justice of the hon’ble Supreme Court of India advocated for arbitration and mediation to ease courts and bring justice efficiently. 

 

Types of ADR in India

There are mainly 5 types of alternative dispute resolution methods followed in India:

  • Arbitration
  • Mediation
  • Conciliation
  • Negotiation
  • Lok Adalat

 

What is Arbitration?

It can be understood as a method of out of court resolution of disputes, particularly for matters civil in nature. The dispute might have arisen between two or more parties. Rather than opting for regular recourse before the courts, some matters subjected to arbitration agreement are resolved through arbitration by a third impartial party appointed as an arbitrator. The matter is not decided arbitrarily, but application of suitable laws is duly followed in arbitration in the presence of arbitration lawyers. The arbitrator who chairs the arbitral proceeding is responsible for deciding the arbitration award based on applicable laws.

 

Conciliation in India

Conciliation is one of the types of ADR in India which promotes settlement through conciliation between parties to dispute. Such parties first need to agree upon resolving their dispute through conciliation. An independent and impartial conciliator is appointed by the parties to dispute. It may be a sole conciliator, or more as per the wish of parties. During a conciliation process, the conciliator has to regard the rights and obligations of parties to dispute, principles of objectivity, fairness and justice, trade usage, previous business practices followed by the parties, etc. A conciliator’s main role is to help parties reach a settlement amicably.

 

What is the main purpose of the Arbitration and Conciliation Act, 1996?

The legislature enacted the Indian Arbitration and Conciliation Act, 1996 with following aspects in focus:

  • To regulate the domestic arbitration and international commercial arbitration in India;
  • To consider and enforce foreign arbitral awards in India;
  • To legally define and govern the concept of conciliation in India;
  • In furtherance of india’s adoption of UNCITRAL Model Law on International Commercial Arbitration in 1985;
  • To promote fair resolution of legal disputes through an impartial party without court intervention;
  • To promote the idea of Alternative Dispute Resolution in India;
  • To avoid unnecessary expense or delay for parties to dispute.

 

Salient Features of Indian Arbitration and Conciliation Act, 1996 - Arbitral Proceeding

  • For civil matters (except the restricted disputes), parties need not knock on the doors of court.
  • In case of an arbitration agreement, the judicial authority before whom a matter is brought may refer the same to an arbitration tribunal.[1]
  • Arbitrator is an impartial person appointed with consent of the parties to dispute.[2]
  • There can be more than one arbitrator as well, but the number has to be odd so that there is no scope for dispute over the arbitration award.
  • Hearing during an arbitral proceeding should be written unless agreed upon by parties to be oral, on the basis of evidentiary documents and other materials.[3]
  • In case of default of a party regarding requisite communication or presence during arbitral proceeding, the arbitral tribunal may decide the matter based on evidence available.[4]
  • Decision of an arbitral tribunal is called arbitration award, is primarily binding and has to be made within 12 months of taking up the arbitral proceeding reference.[5]
  • If required, there are provisions for setting aside an arbitral award under Section 34 of the indian Arbitration and Conciliation Act, 1996.
  • Rules for enforcement of domestic as well as foreign awards under arbitration proceedings are also provided under the Act.

 

Salient Features of Arbitration & Conciliation Act,1996 - Conciliation

  • Parties to a legal dispute settle their matter through a third party under the process of conciliation.
  • Disputes under a conciliation process must have arisen out of legal relationships.
  • An independent and impartial third party is appointed by the parties to dispute and is known as the conciliator.
  • As per the section 63 of Indian Arbitration and Conciliation Act, 1996, there can be more than one conciliator if agreed upon by the parties. But unlike the arbitral proceeding, the number need not necessarily be odd.
  • Conciliation is a kind of out of court settlement process.
  • The conciliation proceedings is initiated when one party serves a written invitation to conciliate a dispute and the other accepts it.
  • Each party submits a brief written statement explaining their version of dispute to the conciliator.
  • The conciliator is free to assist both the parties together or separately as well. The proceedings may be conducted orally or written, as agreed.
  • A conciliator under the Arbitration and Conciliation Act is responsible for assisting the parties to dispute to reach an amicable settlement.
  • The parties to dispute are also free to suggest the grounds of settlement. 
  • When it reflects that the parties have reached a settlement, the possible terms of settlement may be reduced by the conciliator and served to the parties for observation.
  • A conciliation agreement agreed upon by the parties should be signed as per the Arbitration & Conciliation Act. It becomes a binding document since both parties consent to the given terms in the agreement.
  • A conciliator is usually a government official who gives his/ her recommendations in the form of a report.

 

Conclusion

The Arbitration & Conciliation Act, 1996 is the ‘Bramhastra’ which holds the potential to lead to commendable reduction in the judiciary’s workload. Because of fastrack proceedings and less cost, it is efficient for parties to dispute as well. It has been proved very much preferable in business transactions. But the ordinary people often doubt the credibility of alternative dispute resolution in India. They look up towards the judiciary with hope and it is necessary to make them believe in alternate dispute resolution methods through their results. 

 

[1] Section 8 of Arbitration and Conciliation Act, 1996.

[2] Section 11 of Arbitration and Conciliation Act, 1996.

[3] Section 24 of Arbitration and Conciliation Act, 1996.                                                                        

[4] Section 25 of Arbitration and Conciliation Act, 1996.

[5] Section 29A of Arbitration and Conciliation Act, 1996. 

Written By:
Ridhi Khurana

Ridhi Khurana

Gurgaon

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